Turkish Yields Decline for Third Day as Bank Increases Funding

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Turkish bond yields dropped for a third day to the lowest level in a week as the central bank increased its funding after signaling a rate cut yesterday.

Yields on two-year benchmark debt fell one basis point, or 0.01 percentage point, to 7.73 percent at the close in Istanbul after falling as much as six basis points. The three-day decline totaled 25 basis points, the biggest drop in that period since July 6. The lira weakened 0.4 percent to 1.8009 per dollar at 7:15 p.m., depreciating for the first time in three days.

The central bank provided 7.5 billion liras ($4.2 billion) at its lowest annual funding rate of 5.75 percent via one-week repurchase agreements, the most since Dec. 16. It also lent 4.5 billion liras in a one-month repo auction, held once a week on Fridays. The total funding exceeded banks’ repayments of 6 billion liras for weekly repo they borrowed on Aug. 10 and 2 billion liras for monthly repo from July 20.

The central bank raised the maximum amount it may provide via one-week repo at its benchmark rate of 5.75 percent to 7.5 billion liras at the Monetary Policy Committee meeting yesterday, up from 6.5 billion liras since July 19.

The Ankara-based bank kept the benchmark rate unchanged, as well as its highest lending rate of 11.5 percent, saying it may narrow the interest-rate corridor “gradually in the coming period.”

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